Goldman Says India Improving, Could Be One Of EM’s Most Exciting Spots

By Reshma Kapadia

Goldman Sachs offered up a relatively upbeat view of India in a somewhat contrarian move as other remain worried about the country’s prospects.

Goldman’s economists expect GDP growth to rise to 7.2% in 2014 from 5.4% in 2012 and remain high through 2015 to 2016. A decline in oil prices over the next few years in real terms, a better global demand outlook and domestic structural reforms drive the firm’s optimism, Goldman’s Tushar Poddar, Prakriti Shukla and Vishal Vaibhaw write.

The lower oil prices will take a bite out of inflation but also help the country’s deficit problems. The economists also expect investment demand to increase and government consumption to slow. They also say the prospects for reform that the government has proposed to boost foreign direct investment, raising administerd prices to cut the deficit and restructure its power sector look “promising” — enough so that the firm has reduced the chance of policy missteps next year.

“If the current bout of reform momentum is sustained, we believe it could unleash those fundamental forces for growth, and India could be one of the more exciting destinations for investors in the emerging markets space over the next few years,” they write.

The more upbeat view comes on the heels of Moody’s decision to leave its credit rating on India unchanged, which offered investors a bout of relief. Increasingly, some investors have been moving into more cyclical companies that have been hit the hardest amid the concerns about the country’s prospects. The market also welcomed the more optimistic view from Goldman and the WisdomTree India Earnings Fund (EPI) is up almost 3% in early trading.

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DECEMBER 2, 2012 4:51 P.M.

curioxity wrote:

Is it just a coincidence that the three Goldman Sachs's 'experts' are all Indians? Could they be trying to cheer up an otherwise gloomy outlook for India?

DECEMBER 3, 2012 8:10 A.M.

Reshma Kapadia wrote:

Curioxity,
To be fair, do you take issue when "American-sounding" economists are upbeat on the US economy? Markets/Investors often take cues from locally-based economists. And since these Goldman Sachs folks are upgrading their view, they were actually less-than-upbeat at one point.

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Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.